Westlake Village, California – New-vehicle retail sales in the U.S. have improved notably through the first 17 selling days of June when compared with May, indicating tempered but continued recovery, according to J.D. Power and Associates.

Sales for June are expected to be 789,400 units, representing a seasonally adjusted annualized rate (SAAR) of 9.2 million units. This is down by 9 per cent from June 2008, but up by 14 per cent compared with May 2009. Fleet sales declined in June.

“Consumer confidence is improving, and market uncertainty is starting to decline, which has made consumers more willing to take advantage of deals on new vehicles,” said Gary Dilts, senior vice-president of global automotive operations. “In addition, sales incentives, including those from Chrysler dealers facing closure, have helped contribute to the upswing.”

In light of these signs of recovery and the expected introduction of a “Cash for Clunkers” program that will encourage consumers to trade up for new vehicles, J.D. Power is holding its forecasts to 8.3 million retail sales and 10.0 million total sales for 2009. A more favourable environment in the second half of 2009 could result due to continued sales momentum, improved economic fundamentals, and a stronger-than-expected response to the Clunkers program.

While the Cash for Clunkers program could theoretically increase retail sales by as much as 500,000 units on an annualized basis, J.D. Power forecasts that actual sales increases would be considerably lower, due to funding limitations and the duration of the program. The firm said that the stipulations of the 3- to 4-month-long program are restrictive and possibly confusing to consumers, thus limiting its potential.

Recovery in the automotive market could also be hampered by instability and insolvency among vehicle suppliers, according to the report, which forecasts vehicle production to be as low as 8 million units for 2009, a level that has not been seen since the 1980s. For many suppliers, viability is unsustainable at these levels, and with several tier-one suppliers in or approaching bankruptcy, failure of large suppliers would create a ripple effect among smaller suppliers. In turn, this could cripple vehicle manufacturers’ ability to replenish vehicle inventory and hamper prospects for any near-term recovery.

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